IRS offers guidance about reporting wages for COVID-19-related leave

The Internal Revenue Service this month issued guidance for employers on how to report qualified sick and family leave wages for employee leave taken in 2021 under the Families First Coronavirus Relief Act (FFCRA).

Employers are required to report qualified 2021 FFCRA leave wages to employees on either a 2021 Form W-2 (Box 14) or in a separate statement provided with their W-2 forms. The requirement only applies to employers who claim tax credits for the leave wages under the relevant legislation.

According to the IRS guidance, there are separate reporting requirements for leave provided from Jan. 1, 2021 to March 31, 2021, and for leave provided from April 1, 2021 to Sept. 30, 2021. The notice gives additional specific reporting instructions for leave wages that must be entered on Box 1, 3 or 5 of Form W-2. The IRS guidance includes model language employers may provide as part of Form W-2, Box 14 Instructions for Employee, or in a separate statement.

The FFCRA, which was passed in March 2020, required employers with fewer than 500 employees to provide paid sick and family leave for COVID-19-related reasons and provided employer tax credits to cover leave costs. The leave requirement expired in December 2020. However, the Tax Relief Act of 2020 and the American Rescue Plan Act enacted earlier this year extended the tax credits for employers who chose to continue to provide FFCRA leave, first through March 31, 2021, and then through Sept. 30, 2021.